US 10-year government bond yields have climbed to a two-month high in recent days and we expect them to rise further in coming months. By contrast, the Bank of Japan has underlined its determination to prevent 10-year JGB yields from rising much above zero by conducting another fixed-rate operation. The resulting widening in interest differentials has caused a renewed weakening of the yen against the dollar that we think has further to run. Our year-end forecast for yen/dollar remains 120.
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